Non-compliance with the National Minimum Wage in Newham

The London Borough of Newham contracted Ipsos and Community Links to conduct research to develop a greater understanding of how working in the informal economy impacts on the lives of those paid below the National Minimum Wage (NMW). The research includes a literature review and 30 face-to-face in-depth interviews with people either living or working in Newham, and earning below the NMW.

Key Findings:

Awareness of the NMW level varies markedly. Low awareness is particularly noticeable among those working informally, who believe that unskilled, cash-in-hand work does not carry an entitlement to the NMW or other workers’ rights. Limited evidence exists that participants felt exploited despite their low wages, which ranged from under £3 to £5.90 an hour. Rationalisations for low pay include the current economic downturn depressing the ‘going rate’ for unskilled work.

Respondents approve of the NMW in principle, but the NMW level is considered too low. This perception is due, in part, to limited knowledge of in-work support such as tax credits, but also reflects the high cost of living in London. Doubts were expressed about how the NMW can help workers achieve a decent standard of living, given the high cost of living.

All of the participants want better paid jobs, and need help to achieve them. They are less keen for their current employer to be investigated and penalised for non-compliance of NMW  legislation. Participants are actively complicit in hiding their employers’ malpractice because they want to protect their jobs.

Routes out of below-NMW employment must address both factors pushing people towards low pay and the barriers to overcoming low pay. Some barriers are perceptual (e.g. assumption that welfare benefits would stop). Local agencies need to work together to publicise more widely information about in-work financial support, local opportunities for skills training and services offering tailored job search support. Targeting groups prone to low pay through key touch-points, such as debt advice centres, centres for lone parents or Sure Start centres, is also important going forward.